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ECON 20 Lecture Notes - Lecture 16: Market Power, Imperfect Competition, Price Elasticity Of Demand

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School
Irvine Valley College
Department
Economics
Course
ECON 20
Professor
mcneil

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Document Summary

Calculating percentage changes: to calculate percentage change in quantity demanded and price we use a formula based on the following idea. % change in quantity demanded = change in quantity demanded/ initial quantity. % change in price = change in price/ initial price. % change in quantity demanded: change in quantity demanded (q2-q1)/ ((q1 + q2)/2) Using the point hallway between p1 and p2 as the base for calculating the percentage change in price, we get. % change in price (p2-p1) / (p1 + p2)/2. Point elasticity equation: %change in q / % change in p. Elasticity and total revenue: in any market, p x q is the total revenue (tr) received by producers. When price (p) declines, quantity demanded (qd) increases, the two factors p and q move in opposite directions. Effects of prices changes on quantity demanded: p and q are opposite and work against each other.

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Related Questions

Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded =(Q2-Q1)/Q1 divided by percentage change in price= (P2-P1)/P1.

Redo the exercise using price changes of $10 rather than $5.

a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula: Percentage change in quantity demanded =(Q2-Q1)/Q1 divided by percentage change in price= (P2-P1)/P1.

b. Redo exercise using price changes of $10 rather than $5.

 

interval (or arc) elasticity

cross-price elasticity

price elasticity of demand

elastic demand

income elasticity

inelastic demand

inframarginal units

marginal revenue

point elasticity

price effect

quantity effect

total revenue

unitary elastic demand

1. __________________ A measure of consumers’ sensitivity or responsiveness to changes in the price of a good or service.

2. ___________________ When the percentage change in price (in absolute value) is more than the percentage change in quantity demanded (in absolute value).

3. ___________________ When the percentage change in quantity demanded (in absolute value) is more than the percentage change in price (in absolute value).

4. ___________________ When the percentage change in quantity demanded (in absolute value) is just equal to the percentage change in price (in absolute value).

5. ___________________ Total amount paid to a producer for a good or service P * Q.

6. ___________________ The effect on total revenue of a change in price, holding quantity constant.

7. ___________________ The effect on total revenue of a change in quantity, holding price constant.

8. ___________________ An elasticity calculated over an interval of a demand curve or demand schedule.

9. ___________________ Elasticity at a specific price or point on a demand curve.

10. ___________________ A measure of how responsive quantity demanded is to a change in income, all other things constant.

11. ___________________ A measure showing how responsive the quantity demanded of one good is to changes in the price of another good, other factors constant.

12. ___________________ The additional revenue received by producing and selling one more unit of output.

13. ___________________ Units of output that could have been sold at a higher price had the firm not lowered its price to sell additional (marginal) units.